The U.S. Department of Labor’s Misguided ‘Fiduciary’ Rule

Both Democratic and Republican legislators have expressed concerns about proposed regulations from the Obama administration that will change the way Americans receive financial advice. The effect of these rules, if enacted as written, will be negative for savers in Northern Virginia as well as in the rest of the nation. They will disrupt an individual’s ability to access advice during the process of investment and retirement planning.

My read on this proposed set of rules, which happens to be echoed by many other knowledgeable professionals that provide services in this area, is that this proposed “fiduciary” rule is incredibly problematic. In order to comply with the rules as drafted, onerous requirements would be placed on financial advisors and, as a result, most firms would simply eliminate providing guidance to clients who have modest accounts. This will disproportionately affect young savers and those in middle-income brackets. In short, if you have a big retirement account, no worries. If you have a modest account, you are on your own.

As this issue continues to be discussed, it is critical that those in charge listen to the many urgent calls for concern. The group of clients who are most in need of advice and whom the DOL purports to “protect” is likely to be the same group that will be negatively impacted. A national survey released during this past summer by the Financial Services Roundtable, which studied over 1,000 middle-class IRA holders, shows that investors want increased access to financial advice, rather than more regulation of it, and that IRA holders overwhelmingly prefer meeting with a financial advisor face to face rather than relying on a computer program to generate their “advice.”

Please note, the DOL’s stated objective – to ensure that financial professionals and institutions serve in the best interest of their customers – is a goal that I, along with other qualified financial professionals, share and fulfill on a daily basis. In the greater Washington, D.C. area, we have an organization that is devoted to meeting our clients’ needs in this important area of planning. Unfortunately, with the passage and implementation of the rule, as proposed, many of our clients in Virginia, Maryland, the District and throughout the country will no longer have access to our advice or advice from similar firms – unless their account size is adequate to warrant the additional burden of the proposed new regulation.

The 500-page proposed rule, now closed to public comment, will significantly limit access to and choice of retirement products for American consumers. Coupled with reduced access to advice, this is a formula for the average retirement saver falling even further behind in achieving retirement goals. It is common knowledge that many Americans have not adequately saved for retirement. The proposed rule will not help that trend reverse and, if anything, will aggravate the problem.

As we live longer and expect to spend more time in our “golden years” let’s propose rules that facilitate saving for retirement and receiving the advice that is both required and desired — not impose regulations that will require financial firms to limit whom they serve and restrict the tools available to accumulate retirement savings.

Mark Swartz offers securities through AXA Advisors, LLC and investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC.